L1/L2 tokens plunge in 2025 as users rotate to BTC, BNB and revenue-generating protocols
OAK Research’s year‑end report shows major Layer‑1 and Layer‑2 tokens suffered steep price and user declines in 2025 as capital and activity rotated toward Bitcoin (BTC), Ethereum (ETH), BNB Chain and revenue‑generating protocols. Total Monthly Active Users across major chains fell about 25.15%. Solana (SOL) lost roughly 94 million users (>60% decline) while BNB Chain nearly tripled its user base by capturing migration flows. Layer‑2 performance diverged: Base saw TVL gains aided by Coinbase distribution, Optimism and zkSync Era experienced sharp contractions, and Mantle posted modest TVL growth largely tied to concentrated token supply. OAK attributes the token sell‑offs to three structural issues: aggressive and continuous unlock schedules, weak value‑capture linking on‑chain usage to token demand, and institutional preference for BTC/ETH. Developer activity remained resilient — Electric Capital data shows sustained dev growth across EVM and SVM stacks and two‑year full‑time developer growth strongest on Bitcoin. On‑chain revenues concentrated in stablecoin issuers (Tether, Circle) and derivatives venues, leaving undifferentiated infrastructure tokens exposed. Outlook for 2026: continued downside and consolidation risk for undifferentiated L1/L2 tokens without clear revenue models or differentiation (speed, cost, security); protocols with meaningful revenues may stabilize but still face unlock pressure and market volatility. For traders: expect ongoing sell pressure on speculative L1/L2 tokens, flight to base layers and fee‑earning protocols, and heightened sensitivity to token unlock schedules, TVL and on‑chain revenue metrics.
Bearish
The report points to broad selling pressure on L1/L2 tokens driven by structural tokenomics issues (aggressive unlock schedules and weak value capture), user migrations away from many chains, and institutional preference for base layers like BTC and ETH. These factors suggest continued downward price pressure for undifferentiated infrastructure tokens in both the short and medium term. Short‑term: expect volatility and further sell‑offs around token unlocks, negative reactions to falling TVL and user metrics, and rotation into BTC/ETH, BNB and fee‑earning protocols. Medium‑to‑long term: tokens without clear revenue models or differentiation face consolidation or permanent market share loss; protocols that generate real on‑chain revenues or secure institutional support may stabilize but remain vulnerable to large unlocks and macro risk. For traders this translates into tactical shorting or reduced exposure to speculative L1/L2 tokens, monitoring unlock schedules, TVL and on‑chain revenue indicators, and favoring base layers and protocols with demonstrable fee income.